﻿README replication instructions for 

Daniela Osterrieder and Peter Schotman
The Volatility of Long-term Bond Returns: Persistent Interest Shocks and Time-varying Risk Premiums

REVIEW OF ECONOMICS AND STATISTICS

* Section 3 of the paper lists the data sources for the three interest rate time series. The raw data are in "rawdata.txt".

* Summary statistics in table 1 will be reproduced by running the script "Table1.m" in MATLAB.
   - The program loads 
    (1) "rawdata.txt" 
    (2) "ELW_ShiPhi06.m" (a Matlab function to compute the exact local Whittle estimator)
    (3) "LW_ShiPhi06.m" (a Matlab function to compute the exact local Whittle estimator)
  - Results in TABLE1 are table 1 in the paper.
  - We executed the code with Matlab version "MATLAB R2015b" under Windows 7 Enterprise 64-bit Operating System, Intel(R) Core(TM) i7-4770 CPU @ 3.40GHz,
with 16.0 GB of RAM.

* Results in tables 2, 3 and 4 can be replicated by the scripts 
  (1) Main.sce
  (2) Unrestricted.sce
  - Both scripts call "GMMfrac.sci", which contains a set of functions that compute the term structure moments and construct fractional filters. The functions are listed at the top of the file. 
  - These scripts written in SCILAB. SCILAB software can be freely downloaded at www.scilab.org. We executed the programs in Scilab 5.5.1 under Windows 7 Enterprise 64-bit on various computers. 
  - To obtain results for different models set the keyword "model" at the top of the *.sce scripts to either 'fractional', 'AR2' or 'mixture'.
  - The programs load data from the text file "data.txt".
  - The script "datatrans.sce" details the transformation of the raw data to the data used as input in the GMM routines.
  - "fractional.txt" contains example output for the 'fractional' model. 

